AT&T (NYSE: T) executives are pushing a new plan to help fund internet access for rural and low-income Americans. They want tech titans like Google and Meta to contribute to the FCC’s Universal Services Fund (USF).
The USF has been around since 1934, and got a significant update with the Telecommunications Act of 1996. Telecom and cable companies are required by law to make contributions, paying in a percentage of their end-user interstate and international revenues. The FCC can change this percentage each quarter, and just bumped it to 34.4 percent for Q3, up from 32.8 percent in Q2. Companies can and do pass the USF cost on to consumers; most of us see a USF line item on our cell phone bills.
The USF funds the E-Rate program, which subsidizes internet access for schools, and Lifeline program, which gives a $9.25 monthly discount on phone or internet service to eligible consumers.
But the biggest subsidy funded by the USF is the High Cost program, also called the Connect America Fund. This provides payments to eligible service providers, mostly in rural areas, to offset the cost of serving hard-to-reach customers. These companies started out providing voice service, but now their websites promote high speed fiber internet.
Since USF funds are now being used to subsidize internet access, companies that rely on connected consumers should help fund the USF, according to AT&T. Rhonda Johnson, the company’s EVP of Federal Regulatory Relations, laid out the firm’s position recently in a blog post. She said reform of the USF could be a way to bring back the Affordable Connectivity Program, which recently ran out of money. And she called on big tech companies to contribute.
AT&T CEO John Stankey brought the issue up at a recent summit organized by broadband industry association USTelecom. “The seven largest and most profitable companies in the world built their franchises on the internet and the infrastructure we provide,” he said. “They stand to benefit handsomely from every home that is incrementally connected to our networks.”
Stankey called out Google (NASDAQ: GOOG), Meta (NASDAQ: META) and Apple (NASDAQ: APPL) and went on to argue that they should “participate in ensuring affordable and equitable access.” He did not say who else was on his list of the “seven largest and most profitable companies,” and AT&T declined to provide that information. Amazon (NASDAQ: AMZN), which Fortune ranks as the world’s second largest company by revenue, has built its business on the internet. And Microsoft (NASDAQ: MSFT), the world’s largest company by market capitalization, is almost certainly on Stankey’s list, since Azure would have little value without the internet. Another one of the seven could be Nvidia (NASDAQ: NVDA) , currently the world’s third largest company by market cap, a profit machine that needs the internet to move all the data its GPUs are processing.
The seventh company on Stankey’s list could be Walmart (NYSE: WMT), which Fortune ranks as the world’s largest firm by sales. Walmart gets less than 20 percent of its revenue from ecommerce, but that share is growing fast. So fast, in fact, that Verizon decided to partner with the online retailer. Verizon recently announced that some mobile and home internet subscribers can get a discount on the Walmart+ grocery delivery service. Verizon also offers its customers discounts on entertainment packages from Netflix (NASDAQ: NFLX) and Google (YouTube), and says discounts on Apple entertainment are coming soon.
Verizon’s (NYSE: VZ) executives may figure this isn’t the best time for them to make speeches like the one Stankey delivered, but that doesn’t mean they wouldn’t welcome some help from big tech firms when it comes to the USF. Like AT&T, Verizon is a member of USTelecom, the group that hosted the summit where Stankey spoke.
USTelecom also recently told the FCC big tech firms should start contributing to the USF. The association may be preaching to the choir, since the FCC has already asked Congress for the authority to make changes to the contributions methodology and base to reduce the financial burden on consumers, Inside Towers reported. What’s needed now is congressional action empowering the FCC to move forward. But if those actions include allowing the FCC to collect funds from big tech firms, there will be plenty of powerful lobbyists fighting back.
By Martha DeGrasse, Inside Towers Contributing Analyst
This article represents the opinions of veteran telecom industry editor and journalist Martha DeGrasse, an Inside Towers Contributing Analyst with features appearing monthly. DeGrasse owns Network Builder Reports and contributes regularly to several publications. She was formerly a writer and editor with RCR Wireless and a TV business news producer.
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